Chris Lyddan, Editor, International Woodfiber Report, RISI
April 23, 2012
A mild winter in the Eastern USA plus advances in low-cost drilling fattened natural gas supplies and dragged prices to a 10-year low in early April. In fact, prices began falling last summer. Concurrent with that decline in prices, many US pulp and paper mills began switching to higher gas consumption, displacing substantial volumes of biomass. In-woods fiber (logging debris), a relatively new source of fuel, appears to be taking the biggest volume loss initially. Meanwhile, traditional sawmill "hog fuels" (leftovers like bark, sawdust and scraps) face jeopardy, as solid wood companies must dispose of the waste somewhere.
By one major paper company's recent account, only dry fiber (sawmill shavings, a small component) is still competitive with natural gas. Everything else is green and roughly 50% moisture content. Together, in-woods and sawmill biomass account for an estimated $400 million market annually.
Official data is scant but it is estimated that about 40 million tons of biomass are consumed for energy by pulp and paper mills annually, roughly half generated from on-site wood rooms and the remainder purchased on the outside. (Most pulp and paper facilities can deploy "multi-fuels" in boilers, including wood, fossil fuels, purchased electricity and recovered pulp liquors.)
Some are calling the switch to natural gas structural or permanent, while others say halting in-woods crews is risky, if not reckless. One naysayer said "If you think cheap gas is too good to be true, it probably is." Still, an important early movement is underway, although its ultimate impact is unknown. In fact, not a single company contacted could estimate natural gas's impact on the whole industry. "There are just too many variables yet," one mill manager summed.
Either way, some big pulp and paper mills have already plowed ahead full bore while others are currently switching incrementally to more natural gas. In the process, long-time biomass suppliers are obviously scrambling to adjust. More broadly, also giving way to natural gas, consumption of other fossil fuels including coal and fuel oil is set to fall sharply this year.
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Chris Lyddan, Director of Timber and Editor of Woodfiber Report and Timberland Markets, works out of his office in Richmond, Virginia and can be reached at Tel: 804.308.0482 or Email: firstname.lastname@example.org